To best understand how money, wealth, and job creation work, we need to forget all about money. Money complicates things, so we'll start with a bartering system.
John has no wealth, so he goes into the woods, cuts down a tree, and makes a dozen chairs from the tree. He takes the chairs into town to trade. He trades for 10 units of wheat, 10 units of fruit, and a set of clothes. How did he get wheat, fruit, and clothes without having any wealth?
He created wealth(it already existed, it was just unrealized) by making something of value(chairs) from something of little value(a tree) using something of value(his labor/skills/time). You can't just go trade a tree in the woods for goods.
So, John has essentially created wealth. Now he can go make more chairs, and trade for more goods. Let's say his chairs become popular, so John hires Jack to help him. For every chair Jack makes, John shares the goods he trades each chair for. John's business created the wealth and opportunity to give Jack a job, and the means to obtain his own wealth.
At this point, it should be quite clear, that the entrepreneur is the one who created the wealth, job, and opportunity. John, Jack, and the community in general are all more wealthy because of it.
John created the wealth.
John created the job.
John created the opportunity for Jack.
John brought new wealth into the community, which everyone benefited from.
Jack 'gave' his labor to John, and in exchange was given wealth. Jack was not cheated, Jack could have gone and made his own chairs, but Jack agreed to work for John for a certain reimbursement.
When you take money out of the equation, you can more easily see where wealth and jobs come from. They don't come from the consumer, they come from the people who make the jobs.
When you add money into the equation, it gets confusing. Money doesn't represent the wealth of the country. Money isn't created when wealth is created. Money has its own policies. Money is destroyed separately from wealth.
Yeah but who owned the land he got the tree from!
In the beginning, whoever got there first.
It's just an example of wealth creation. A tree may be considered to be worth $50, while the products you can make from the tree are considered to be worth $500. It is the people who use their labor to create the wealth, and the opportunities for others to use their labor to create wealth, who do the most for society.
I was giving you an example of whats probably coming, the landowner was exploited, poor Jack was exploited, John is greedy or he would have given two chairs to Jack blah,blah.
For John's trade to happen, there must be:
1) Demand for his chairs (someone has to want them)
2) The means to trade for his chairs (the same people who want them must also have something of value to trade)
In other words, John cannot simply go out and create jobs unless enough other people want his product AND have the wealth to pay for it.
But ALL wealth comes from entrepreneur-type activities. The person who is trading wheat created that wealth by growing the wheat. The person who is trading the fruit created that wealth by growing fruit. The person who is trading clothes created that wealth by making clothes.
See, it's the people who create jobs who create the wealth, which makes trade and demand possible. What did Jack do to create demand? Nothing, until he had a job which gave him wealth to trade.
If you can't see where the wealth came from in the story, I'll be happy to elaborate.
I do believe that you're missing a very important part of this tale.
When John and Jack make chairs, Jack only gets 2 of them (or the wheat, fruit and clothes they "buy") while John keeps 3 for himself. As John spends much of his time finding customers, sharpening axes and looking for ways to improve the chairs it leaves Jack making more chairs than John and Jack thus deserves 3 chairs out of the 5 they create.
That John very nearly starved to death making the first 5 while Jack stayed home, tended his garden and eating (although not eating well) is immaterial. We should not allow John to consider that while dividing the chairs up.
The real work is done by Jack and he deserves more chairs. In addition to that, John is rich (after all, he owns all the tools as well as more chairs) and therefore John must give 1 of his 2 chairs (after equitable distribution to Jack) to Bill, because Bill would rather tend his little garden than make chairs and is getting hungry doing so.
I don't disagree with anything you say here. And, no, I don't need you to elaborate on where the wealth came from.
My point is that, for your oversimplified example to mean anything at all, it is necessary for all players in your story to have enough wealth to create demand. In an economic system that has been distorted, this is not always the case..
The meaning is that the job creators are the ones responsible for wealth, jobs, and demand. That's the point that is usually missed, people say it is the employees who create demand. No, it's not. It's the job creators and the wealth creators.
I find overanalyzing your story problems to be really tedious and a waste of time.
Our economic system doesn't work that way because the system is rigged in favor of the wealthy. Stating this truth is not demonizing the wealthy; it is facing facts.
Your statements that job creators create demand, for example, is factually true, but just one tiny little piece of a large and complex system. It will not hurt job creation or the wealthy to be taxed more, even as much as 10-15% more. Most very wealthy people don't even pay attention to a 3-5% or more fluctuation in their income. That is just part of the natural ebb and flow of their earnings.
Okay, so now everyone in town has all the chairs they need and Jack says, hey I know how to build tables...John says Awesome...Jonh still makes the most profit because Jack is his employee, this was not Johns idea, John did not create the wealth, but John will have the bigger share of the profit, anf Jack gets a new shirt
If Jack wants to build the business with John, he can. He can negotiate better wages, or be content with what he has. He can also go start his own table-making business.
Once again, it is not the employees who create the jobs.
Do you understand, in the limited scope of the example, how John is the one responsible for creating Jack's job?
Yes I see John created Jacks job and the wealth of the chairs, I also see that Jack does not have the equipment to build his tables and as an employee of johns couls in fact be able to do many things John can not, creating much wealth that John could not, but John will benefit the most because he has the equipment. The employee did not create the job, he did however create the extension of wealth.
Jack can save up and start his own business. Or he can improve John's business. Like I said, I'm not disagreeing with that, but Jack isn't disadvantaged in the slightest. If his idea and skills are good, he will increase his own compensation. If he works with John, they can both benefit from Jack's input. Together, they might create more jobs.
Again though, all jobs come from the creators, not from the employees. We demonize the job creators in this society though.
Jaxson and Wilderness, I do not demonize job creators, I stand up for the fact that without those employess those ideas would forever be in the heads of the creators. For instance, I have an awesome idea in my head, I will need a building, equipment and employees, I would be a job creator...but, I do not have the money to do such things at this time and when I do, I will want my employees to earn enough to buy the product I want to sell. I KNOW this is a winner of an idea, but until I have employees, etc it will remain just that, a great idea.
I applaud you for that, and hope you can realize it.
Will it remain just an idea because you do not have the skills to implement it yourself? Try selling the idea, try getting a loan based on the merits of the idea. Being stuck because you are unwilling to move is nobodies fault but your own.
Not a very nice way to say that, but yes, I do not have the skill required to do this on my own, I do know people who do however and may want to work for me if I can pay them well...I do have a business plan but I also have three in college and will need to pay down some debt before a bank would take a peak, plus in all honestly, I would love to just save the money myself rather than pay on a loan, but we will see which is fastest to achieve.
I'm sorry, what wasn't nice? It was a question. Have you considered a partnership with one of those with the other skill?
I guess I read tone, sorry, yes I have a great choice, but problem is she works 40+hours a week at this time...I have thought however, to pull a few pieces together and run a promotional give-away to maybe jump start the brand...
Actually I think you misread tone. It was just some suggestions to possibly give you a new way to look at your circumstance, good luck!
wanted to just add, I have part of the skill, the other half however is imperative.
I do understand, actually. However, in your case you need to:
1) Find an investor, and pay them for the start up capital.
2) Find the other skills need, and pay them. (presuming the skills are not just labor)
3) Find the employees needed, and pay them.
4) Pay yourself, if there's any thing left. And if there's not, it's not worth doing.
Now, if you pay the employee labor to much 4) becomes impossible and that's what so many don't seem to understand. If you don't pay for 1) and 2) you won't pay 3) either. You obviously do understand but seem to insist that it doesn't matter if someone else is the employer. You believe that you should make the call as to what is too much, not the employer and the world doesn't work that way.
I would also say that it won't matter how much you pay your employees; they will grumble that it isn't enough. Whatever you take out for yourself is too much as you aren't working. You will find people doing the same thing to you (as an employer) that you are doing to other employers now.
I do see all your points, we are a grumbling and complaining society...However, when I do have the business, will I pay to insure my building? Yes. Will I pay to insure my equipment? Yes. Will I then also pay to insure my employees? Yes.
Henry Ford actually had the intelligence to forsee if you do not pay your employees enough to buy the products they make then you are decreasing your ability to remain in business, decreasing demand for your product. Sam Walton understood that products need to be affordable and would roll over in his grave if he knew the way his creation has changed.
My point is that the creators of jobs are only a piece of the equation, without the employees, the equipment, the building, without those that created the equipment, buliding, and supplies, then the job creator is just someone with an idea. All parts of the puzzle are needed, and I would not need an ever increasing profit margin to the detriment of any piece of this puzzle.
I'm with you all the way - all the pieces MUST fit together to make a whole puzzle.
At the same time, I can't help thinking that the vast majority of start up companies can afford to only pay minimum wage, or close to it. How do you then handle the knowledge that you aren't paying a living wage to the people that are making your company work, that are paying your wage and putting food on your table in a very real manner?
We've all seen companies go under and die when strong unions demand more than is there (hostess?) - I've seen it happen twice and one town that very nearly died when the big employer closed the doors. I've also seen one location of a major corporation that nearly went down because they paid too little to attract decent help. Workers have to understand and accept that it cannot be an adversarial thing just as employers do.
The typical entrepreneur is someone that works very hard and long hours for very little return. If the business survives and becomes a going concern they deserve to paid, and paid very well, for that past risk and effort in creating jobs. Ditto for investors that have nothing in the business but money - money that they use to feed themselves with. Again, it takes many pieces and each piece needs and deserves to be paid. There is really no piece that is more important, save possibly for the entrepreneur himself.
Who provides the axe to cut the tree, the knife to whittle the table and the building to stay out of the rain while doing so? Who provides the "customer" for the table to go with the chairs? By this time, Bill, Gary and George are probably making chairs as well - who takes the time to tote the wheat, fruit and clothing the tables "buy" to the "employees"? Who has used some of their "profits" to add more tools and building space to the business so that Bill, Gary and George can work?
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